Why Was US Direct Investment in Latin America Lower in 1985

question 28

Multiple Choice

Why was US direct investment in Latin America lower in 1985 than in 1980?

• A)inflation in the US
• B)recessions in the Latin American countries
• C)international debt problems in the Latin American countries
• D)a recession in the US

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Definitions:

Capital Constraints

Limitations on the amount of capital a company or economy can obtain, often leading to restrictions on growth and investment.

NPV Analysis

Net Present Value Analysis, a method of evaluating the profitability of an investment by calculating the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Cost of Capital

The rate of return that a company must earn on its investment projects to maintain its market value and attract funds, encompassing debt and equity.

Internal Rate

Often referred to as Internal Rate of Return (IRR), it is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.